Taxation

Australian Taxation Law

Name of the Student:

Name of the University:

Author’s Note:

Table of Contents

Answer to Question No.1:-        

Answer to Question No.2:-        

Answer to Question 3:-        

a)        Net Capital Gain in Normal Situation:-        

b)        Net Capital Gain in Alternative Situation 1:-        

c)        Net Capital Gain in Alternative Situation 2:-        

References:-        

Answer to Question No.1:-

        It is assumed that Hillary is a permanent Australian resident and she is liable to pay taxes on her taxable incomes under Australian taxation rules.

        As noted in the case study, Hillary is not a professional writer and had written her experience in a story form for the first time. Therefore, the income generated from the sale of the copyright of her story can be considered as CGT income. However, it should be noted that she had made an agreement with Daily Terror and had received the income as a part of the agreement (Arulampalam et al. 2012).  She did not own the ownership of the copyright and did not transfer the ownership rather submitted it under the terms of the agreement. Therefore, the income from the sale of the copyright can be classified as normal income, earned for providing service as per the agreement under the “Section 393-10 of the Income Tax Assessment Act 1997”. 

        Hillary had sold the manuscript of her story and some of her photographs. The manuscript and the photographs can be considered as her personal assets. As per case verdict of “Brent v FCT (1971) 125 CLR 418”, it can regarded as sale and the income would be then treated as normal income. Therefore, sale of any such assets should be treated as CGT events. However, as the manuscript was not narrative, the sale of manuscript and the photographs should be considered as CGT events (Evans et al. 2015).

        If Hillary would write the story for her own satisfaction and sell it later. Then the transfer of ownership of the copyright, would be considered as CGT events under “S-15-2 of Income Tax Assessment Act 1997”, as the income would not generated under any agreement (Bankmann et al. 2012).

Answer to Question No.2:-

        As mentioned in the case study, the loan of $40000 was given to the son by his parent with a mutual agreement to repay $50000 at the end of five years. However, the amount has been repaid by the son within two years with additional $4000 ($40000 x 5% p.a. x 2 years) on the borrowed amount, though the parent had not asked for any interest.